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Test your basic knowledge |
AP Microeconomics
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = 8 - infinite change in demand to price change
Perfectly elastic
Law of Diminishing Marginal Utility
Total Revenue Test
Perfectly inelastic
2. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Spillover costs
Four-firm concentration ratio
Producer surplus
Monopolistic competition long-run equilibrium
3. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Opportunity Cost
Determinants of Demand
Marginal Cost (MC)
Resources
4. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Price Ceiling
Marginal Productivity Theory
Market Economy (Capitalism)
Accounting Profit
5. Costs that change with the level of output. If output is zero - so are TVCs.
Total variable costs (TVC)
Determinants of elasticity
Productive Efficiency
Natural Monopoly
6. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Consumer surplus
Free-Rider Problem
Implicit costs
Average Total Cost (ATC)
7. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Normal Profit
Price Ceiling
Specialization
Comparative Advantage
8. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Price discrimination
Perfectly competitive long-run equilibrium
Income Elasticity
Marginal Productivity Theory
9. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Perfectly elastic
Determinants of Labor Demand
Profit Maximizing Resource Employment
Price elasticity
10. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Shortage
Scarcity
Production function
Complementary Goods
11. The mechanism for combining production resources - with existing technology - into finished goods and services
Average Variable Cost (AVC)
Market Economy (Capitalism)
Shutdown Point
Production function
12. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Allocative Efficiency
Positive externality
Marginal Cost (MC)
Consumer surplus
13. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Least-Cost Rule
Natural Monopoly
Four-firm concentration ratio
Producer surplus
14. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Accounting Profit
Absolute Advantage
Negative externality
Marginal Revenue Product (MRP)
15. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Shutdown Point
Accounting Profit
Determinants of Labor Demand
Comparative Advantage
16. Ed = 1
Short run
Opportunity Cost
Complementary Goods
Unit elastic demand
17. The sum of consumer surplus and producer surplus
Marginal Analysis
Total Welfare
Necessity
Short run
18. The difference between total revenue and total explicit costs
Monopoly long-run equilibrium
Absolute prices
Accounting Profit
Allocative Efficiency
19. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Market Equilibrium
Private goods
Economics
20. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Constant cost industry
Price floor
Subsidy
Spillover benefits
21. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Determinants of Labor Demand
Diseconomies of Scale
Income Elasticity
Constrained Utility Maximization
22. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Necessity
Variable inputs
Consumer surplus
Long Run
23. The additional cost incurred from the consumption of the next unit of a good or a service
Total Revenue Test
Marginal Cost (MC)
Comparative Advantage
Monopsonist
24. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Average Total Cost (ATC)
Fixed inputs
Explicit costs
Comparative Advantage
25. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Monopoly long-run equilibrium
Marginal Productivity Theory
Cross-Price Elasticity of Demand
Economies of Scale
26. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Determinants of Demand
Economies of Scale
Average Variable Cost (AVC)
27. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Cartel
Law of Supply
Long Run
Marginal Cost (MC)
28. The price of a good measured in units of currency
Absolute prices
Total Fixed Costs (TFC)
Allocative Efficiency
Marginal Resource Cost (MRC)
29. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Average Variable Cost (AVC)
Law of Demand
Spillover benefits
Scarcity
30. All firms maximize profit by producing where MR = MC
Substitution Effect
Absolute prices
Comparative Advantage
Profit Maximizing Rule
31. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Economic Growth
Oligopoly
Unit elastic demand
Average Fixed Cost (AFC)
32. A good for which higher income decreases demand
Profit Maximizing Resource Employment
Inferior Goods
Implicit costs
Constrained Utility Maximization
33. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Marginal Cost (MC)
Monopolistic competition long-run equilibrium
Average Fixed Cost (AFC)
Normal Profit
34. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Total Fixed Costs (TFC)
Total Revenue
Consumer surplus
Variable inputs
35. Exists if a producer can produce more of a good than all other producers
Market power
Income Effect
Absolute Advantage
Profit Maximizing Rule
36. The ability to set the price above the perfectly competitive level
Market Equilibrium
Consumer surplus
Market power
Monopoly long-run equilibrium
37. The total quantity - or total output of a good produced at each quantity of labor employed
Law of Demand
Total Product of Labor (TPL)
Price Elasticity of Supply
Positive externality
38. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Resources
Normal Profit
Marginal Cost (MC)
Economies of Scale
39. The difference between total revenue and total explicit and implicit costs
Average Fixed Cost (AFC)
Demand for Labor
Economic Profit
Luxury
40. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Spillover benefits
Average Variable Cost (AVC)
Constrained Utility Maximization
Fixed inputs
41. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Positive externality
Resources
Market power
Total Fixed Costs (TFC)
42. The output where ATC is minimized and economic profit is zero
Break-even Point
Necessity
Short run
Derived Demand
43. The imbalance between limited productive resources and unlimited human wants
Perfectly inelastic
Scarcity
Accounting Profit
Unit elastic demand
44. The additional benefit received from the consumption of the next unit of a good or service
Marginal Benefit (MB)
Public goods
Perfectly inelastic
Positive externality
45. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Marginal tax rate
Determinants of Supply
Absolute prices
Producer surplus
46. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Four-firm concentration ratio
Economies of Scale
Perfect competition
Excise Tax
47. A firm that has market power in the factor market (a wage-setter)
Break-even Point
Constant Returns to Scale
Market Equilibrium
Monopsonist
48. Product demand - productivity - prices of other resources - and complementary resources
Determinants of elasticity
Price discrimination
Determinants of Labor Demand
Implicit costs
49. Ed < 1
Monopoly long-run equilibrium
Spillover costs
Total Fixed Costs (TFC)
Price inelastic demand
50. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Non-collusive oligopoly
Resources
Productive Efficiency
Production function